Correlation Between Infosys and CHURCH

Can any of the company-specific risk be diversified away by investing in both Infosys and CHURCH at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Infosys and CHURCH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Infosys Ltd ADR and CHURCH DWIGHT INC, you can compare the effects of market volatilities on Infosys and CHURCH and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Infosys with a short position of CHURCH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infosys and CHURCH.

Diversification Opportunities for Infosys and CHURCH

-0.26

Correlation Coefficient

Infosys  CHURCH

Very good diversification

The 3 months correlation between Infosys and CHURCH is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and CHURCH DWIGHT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHURCH DWIGHT INC and Infosys is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Infosys Ltd ADR are associated (or correlated) with CHURCH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHURCH DWIGHT INC has no effect on the direction of Infosys i.e., Infosys and CHURCH go up and down completely randomly.

Pair Corralation between Infosys and CHURCH

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the CHURCH. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 1.04 times less risky than CHURCH. The stock trades about -0.06 of its potential returns per unit of risk. The CHURCH DWIGHT INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,855  in CHURCH DWIGHT INC on October 11, 2024 and sell it today you would earn a total of  80.00  from holding CHURCH DWIGHT INC or generate 1.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

Infosys Ltd ADR  vs.  CHURCH DWIGHT INC

Infosys Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

CHURCH DWIGHT INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHURCH DWIGHT INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CHURCH DWIGHT INC investors.

Pair Trading with Infosys and CHURCH

The main advantage of trading using opposite Infosys and CHURCH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infosys position performs unexpectedly, CHURCH can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CHURCH will offset losses from the drop in CHURCH's long position.

The idea behind Infosys Ltd ADR and CHURCH DWIGHT INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.